pers Phelps Canning Company is considering an expansion of its facilities, its current income statement is as follows: 36,600,000 1960, Lost Variable expense for ef sales) Fixed expense 1,148.00 20.000 Earning before interest and taxes (1 interest ( cost) 0.00 Farning before taxes (ET) Ya (35) 361 Earnings after taxes (LAT) 30.000 $1.4 Shares of common stock PS Phelps Canning Company is currently financed with 50 percent debt and 50 percent equity common stock). To expand facilities, Mr. Phelps estimates a need for $3.6 million in additional financing. His investment desler has laid out three plans for him to consider 1 Sell $3.6 milion of debt at 12 percent 2 Sell $3.6 milion of common stock at $30 per share. 3. Sell $1.80 million of debt at 11 percent and $180 milion of common stock at $40 per share Variable costs are expected to stay at 50 percent of sales, while fixed expenses will increase to $2.460,000 per year. Mr. Phelps is not sure how much this expansion will add to sales, but he estimates that soles will rise by $1.80 million per year for the next five years Mr Phelps is interested in a thorough analysis of his expansion plans and methods of financing, He would like you to analyze the following: a. The break-even point for operating expenses before and after expansion in sales dollar). (Enter the answers in dollars nolia millions) reak even point Before expansion liter expansion b. The DOL before and after expansion. Assume sales of $6.6 million before expension and $7.6 million after expansion (Round the final answers to 2 decimal places) DOL Before expansion After expansion 1 The DFL before expansion at sales of $6.6 million (Round the final answers to 2 decimal places) DEL 62 The DFL for all three methods after expension. Assume sales of $76 million. (Round the final answers to 2 decimal places.) 100k Debt Ser Det se Equity d. Compute EPS under all three methods of financing the expansion at $76 million in sales (first year and $10.5 million in sales lost year) Pound the final answers to 2 decimal places) EPS Laste First 1 Debe Se Det Selity e. Not available in Connect pers Phelps Canning Company is considering an expansion of its facilities, its current income statement is as follows: 36,600,000 1960, Lost Variable expense for ef sales) Fixed expense 1,148.00 20.000 Earning before interest and taxes (1 interest ( cost) 0.00 Farning before taxes (ET) Ya (35) 361 Earnings after taxes (LAT) 30.000 $1.4 Shares of common stock PS Phelps Canning Company is currently financed with 50 percent debt and 50 percent equity common stock). To expand facilities, Mr. Phelps estimates a need for $3.6 million in additional financing. His investment desler has laid out three plans for him to consider 1 Sell $3.6 milion of debt at 12 percent 2 Sell $3.6 milion of common stock at $30 per share. 3. Sell $1.80 million of debt at 11 percent and $180 milion of common stock at $40 per share Variable costs are expected to stay at 50 percent of sales, while fixed expenses will increase to $2.460,000 per year. Mr. Phelps is not sure how much this expansion will add to sales, but he estimates that soles will rise by $1.80 million per year for the next five years Mr Phelps is interested in a thorough analysis of his expansion plans and methods of financing, He would like you to analyze the following: a. The break-even point for operating expenses before and after expansion in sales dollar). (Enter the answers in dollars nolia millions) reak even point Before expansion liter expansion b. The DOL before and after expansion. Assume sales of $6.6 million before expension and $7.6 million after expansion (Round the final answers to 2 decimal places) DOL Before expansion After expansion 1 The DFL before expansion at sales of $6.6 million (Round the final answers to 2 decimal places) DEL 62 The DFL for all three methods after expension. Assume sales of $76 million. (Round the final answers to 2 decimal places.) 100k Debt Ser Det se Equity d. Compute EPS under all three methods of financing the expansion at $76 million in sales (first year and $10.5 million in sales lost year) Pound the final answers to 2 decimal places) EPS Laste First 1 Debe Se Det Selity e. Not available in Connect
